JA Solar's Results Bad but Not Awful

JA Solar Holdings Co. Ltd. (NASDAQ: JASO) reported third-quarter 2012 results before markets opened this morning. The China-based solar panel maker reported a net loss per American depositary share (ADS) of $0.30 on revenues of $260.9 million. In the same period a year ago, the security and monitoring firm reported a loss per ADS of $0.37 on revenue of $287.5 million. Third-quarter results compare to the Thomson Reuters consensus estimates for a loss per ADS of $0.20 and $236.99 million in revenue.

The company's CEO said:

In spite of tough market conditions, shipments exceeded the top end of our guidance in the third quarter, thanks to robust sales across emerging markets. &#8230; In China, shipments more than doubled sequentially, largely driven by a strong pipeline of projects from major utility companies. We continue to perform strongly in Japan, where we achieved record quarterly shipments, thanks to our market development efforts and high-efficiency, high-quality product offerings.

JA Solar may have sold more product, but the company paid the price in margin. Gross margin was a negative 5.9%, compared with a positive 4.8% margin in the second quarter. Excluding items, gross margin would have been a negative 3.7%.

The company's business is strong in its home country, where sales doubled. Like other Chinese solar makers Yingli Green Energy Holdings Co. (NYSE: YGE) and JinkoSolar Holding Co. Ltd. (NYSE: JKS), JA Solar will continue to focus on sales in China and increase efforts in Australian, Southeast Asian and South American markets.

Earlier this month, JA Solar consolidated its ADS from 1 ADS being equal to 5 ordinary shares to a new ration of 1-to-1, in order to avoid delisting. The change has not helped the ADS price much.

Shares are up about 1.5% in premarket trading this morning, at $0.66 in a 52-week range of $0.58 to $2.34. Thomson Reuters had a consensus analyst price target of around $1.05 before today's results were announced.